Back in black

It feels like it’s been a while, doesn’t it?

Despite some geopolitical headwinds, another uptick in Treasury yields, and rising crude oil prices, the US market put together its first up week in two weeks, and its strongest week in nine. In the process, both the S&P 500 (SPX) and the Dow Jones Industrial Average (DJIA)—the latter hitting a seven-day winning streak on Friday—got back into the plus column for the year.

On Thursday the SPX pushed above its mid-April swing high to its highest level since March 21 (see chart below), while the CBOE Volatility Index (VIX)—the widely watched market “fear” gauge—ended the week with its lowest close (12.78) since January—a nearly 75% decline from its February peak.

S&P 500 (SPX), 1/17/18 – 5/11/18 S&P 500 daily chart

Source: OptionsHouse

But it was the small-cap Russell 2000 (RUT) that arguably had the best run of the week, despite a win streak one day shorter than the Dow’s and a percentage return slightly smaller than the Nasdaq 100 (NDX): On its fifth consecutive up day on Thursday, the RUT rallied to its third-highest level on record, and came within 0.38% of its January 24 all-time high of 1615.52.

Interestingly, some of the week’s more conspicuous—and potentially negative—events failed to rattle the market. Tuesday’s announcement that the US was pulling out of the Iran nuclear deal and will be reimposing sanctions spiked crude oil prices to their highest level since November 2014, but failed to elicit much more than a shrug from the SPX, which dropped intraday but rallied to close around breakeven—and then followed up with three more days of gains to end the week. On Wednesday, the 10-year Treasury yield pushed back above the dreaded 3% again, but instead of selling off (as it did the last time this happened on April 24), the SPX closed up nearly 1%. Here’s the rundown for US indexes:

US Stock Index Comparison table for week ending May 11, 2018

Sector performance last week reflected some rotation away from what some traders believe are "defensive" areas of the market. The top-performing S&P 500 sectors: Energy (+3.7%), Financials (+3.5%), and Industrials (+3.4%). The worst-performing sectors were Utilities (-2.3%), Consumer Staples (-0.5%), and Real Estate (+0.6%).

One of the market’s big moves came courtesy of government ruling: A California mandate to include solar panels in most new single-family homes helped propel many solar-related stocks higher on Thursday, including SolarEdge Technologies (SEDG), which exploded more than 16% to the upside.

Crude oil continued to dominate the futures headlines, amid the scuttling of the Iran nuclear deal. The move, which some industry watchers believe may drive up oil prices in the long-term,1 seemed to have that immediate effect. June crude oil futures (CLM8) topped $71/barrel on Wednesday—the market’s highest level since November 2014—and nearly reached $72 on Thursday before taking a breather on Friday. (Many energy-related stocks also saw their shares jump, including Devon Energy (DVN), which gained more than 8% from Tuesday to Friday.)

Soybean futures dropped 2% on Monday amid reports that Chinese buyers were canceling their orders because of the US-China tariff threats;2 corn and wheat futures followed suit.

Looking ahead, aside from a flurry of Treasury auction announcements (mostly on Thursday), it’s a light week for economic data, although it includes the month’s first housing numbers:

Tuesday: Retail Sales, Business Inventories, Housing Market Index

Wednesday: Housing Starts, Industrial Production, Atlanta Fed Business Inflation Expectations

Thursday: E-Commerce Retail Sales, Leading Indicators

Lots of futures contract expirations, though (mostly grains and currencies):

Monday: Australian dollar (6AK8), British pound (6BK8), Euro FX (6EK8), Japanese yen (6JK8), Mexican peso (6MK8), Russian ruble (6RK8), corn (ZCK8), soybean oil (ZLK8), soybean meal (ZMK8), oats (ZOK8), rough rice (ARK8), soybeans (ZSK8), wheat (ZWK8), lean hogs (HEK8)

Tuesday: Canadian dollar (6CK8), cocoa (CCK8), lumber (LBSK8)

Wednesday: S&P 500 VIX (VXK8)

Friday: coffee (KCK8)

Okay, earnings seasons is winding down, but there are still several high-profile names scheduled for this week, including Walmart (WMT), which just made a huge move into e-commerce:

Monday: Agilent (A), China Lodging (HTHT), Invitation Homes (INVH), Vipshop (VIPS)

Tuesday: Dick's Sporting Goods (DKS), Home Depot (HD), Boot Barn Holdings (BOOT)

Wednesday: American Eagle (AEO), Macy's (M), Baozun (BZUN), Cisco Systems (CSCO), Ctrip (CTRP), Flowers Foods (FLO), Jack In The Box (JACK), Netease (NTES), Take-Two (TTWO)

Thursday: KEMET (KEM), Perry Ellis PERY), The Children's Place (PLCE), Wal-Mart (WMT), Applied Materials (AMAT), Nordstrom (JWN)

Friday: AstraZeneca (AZN), Campbell Soup (CPB), Deere (DE), Hibbett Sporting (HIBB)

Go to the E*TRADE market calendar (logon required) for an up-to-date schedule, along with a complete list of splits, dividends, IPOs, and other market events.

Dow Pow: The Dow may be lagging the other US equity benchmarks, but the Blue Chip index is currently on its longest winning streak since October 31-November 8, 2017.


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1 Trump will kill the Iran nuclear deal — and that's a 'long-lasting' boost for oil prices. 5/8/18.

2 Washington Post. China cutting US soybean purchases in face of tariffs threat. 5/9/18.